Southeastern Saskatchewan biodiesel plant

A group of private investors is planning to build a renewable diesel plant in southeastern Saskatchewan.

Josh Gustafson, chief executive officer of Covenant Energy, said this would be the first stand-alone hydrogenation-derived renewable diesel facility in Canada and it could begin production in the second half of 2023.

The plant would have capacity to produce 6,500 barrels daily or between 300 and 325 million litres per year. That would require between 325,000 and 350,000 litres of canola oil feedstock, from about 35 million bushels of canola seed.

Products include renewable diesel, arctic-grade renewable diesel and aviation fuel.

It will be designed with doubling capacity in mind and would drive demand for about 80 percent of the production capacity of a new one-million-tonne-per-year crush plant, leading to a co-location opportunity, Gustafson said.

Pre-front-end engineering and feedstock studies, and a marketing, demand and pricing study have already been done in conjunction with the City of Estevan and the provincial coal transition fund. Gustafson said the plant would likely be built near Estevan.

He said the product is superior to biodiesel because it is a 100-percent replacement for diesel. The technology uses recycled hydrogen during production, creating a low greenhouse-gas footprint.

The technology has been around for about 10 years and Covenant is working with a company that has patents, he said.

“Nobody is currently doing this in Canada,” Gustafson said.

Covenant is a two-year old company of five partners including Gustafson, his father, his brother, a brother-in-law and a cousin. They operate a 13,500-acre grain farm near Macoun, and claim more than 70 years of farming experience, more than 20 years of experience in the oil and gas sector, and the same time in corporate finance.

“The main driver of the entire project is the federal government mandate and the releasing of the Clean Fuel Standards,” Gustafson said. “It’s setting up some mandates for fuel blending but also is rolling out the carbon credit creation system and reduction targets.

“There will be an opportunity for companies or facilities like ours to create credits by producing green fuels that we’ll trade on a market.”

He said there will be demand for alternative fuels, especially one that is chemically identical to petroleum fuel.

Gustafson said renewable diesel is “not in the same ballpark” as biodiesel. The process of creating the renewable fuel involves removing the oxygen from the oil, which leaves a product similar to fossil fuel.

Greenhouse gas emissions will be reduced by 80 to 85 percent compared to fossil fuel diesel and there will be no carbon lifecycle.

“It’s the way the world economy is going,” he said.

At the end of 2020 there were four plants operating in the United States, six under construction and another five proposed. They use a variety of feedstocks, including waste fats, animal fats and vegetable oil.

Last year Finland-based Neste was the largest producer of renewable diesel with plants in Finland (two), Rotterdam and Singapore.

Production is expanding significantly around the world and at least one industry tracker suggests 13 billion litres of production by 2024.

Gustafson suggested not all the plants will be as green as those using canola, because of the carbon scores of other feedstocks such as palm oil.

“This is a good opportunity to be a leader in renewable diesel production,” he said of Canadian production.

Gustafson also said that as a farm family the partners have long seen the need for value-added processing. The opportunity to crush seed, process the oil and sell it back to consumers as fuel is a closed loop system that could have a big impact.

Aside from construction jobs, Covenant estimates there could be up to 60 permanent full-time jobs.

Mike Ammeter, chair of the Canadian Canola Growers Association, said the push toward renewable diesel production opens another market for canola growers.

“If we go to a clean fuel standard of at least 10 percent that’s the equivalent market of our annual export to Japan,” he said. “That’s a significant amount. The other we’ve got to contemplate too is, we keep it at home. That’s jobs in Canada for Canadians. It’s pretty tough to argue with that.”

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